The offer is still on the table

March 19, 2012

This behind the scenes look at the Grand Bargain doesn’t change my original impression of the negotiations, but it does lend some details that actually make it worse than I thought:

A lot of red ink, the Republicans thought. But the major elements of a bargain seemed to be falling into place: $1.2 trillion in agency cuts, smaller cost-of-living increases for Social Security recipients, nearly $250 billion in Medicare savings achieved in part by raising the eligibility age. And $800 billion in new taxes.

In Boehner’s offer Friday night, the taxes came with strings attached. The Republicans wanted Obama to give up plans to raise the tax rate paid by the wealthiest Americans, now set at 35 percent. Instead, they wanted that rate to go down. They also wanted to preserve low rates for investment income — one of the biggest perks for the wealthy in the tax code — and establish a blanket exemption from U.S. taxes for corporate profits earned overseas.

Another key caveat: Much of the $800 billion would have to come from overhauling the tax code — not from higher tax rates. The Republicans believed lower rates and a simpler code would generate new revenue by discouraging cheating and spurring economic growth. If the White House would agree to count that money, the Republican leaders said, then they might have a deal.

That last condition was a problem. For years, Democrats have mocked the Republican argument that tax cuts pay for themselves by boosting the economy, an assertion for which evidence is scant. Many independent budget experts say the effect, if it exists, would be almost impossible to measure and useless in crafting a budget. Fiscal “snake oil,” some Democrats say.

So there were issues to work out that Sunday but also reason for optimism. In its counterproposal, the White House appeared to accept the $800 billion tax offer and a lower top rate. The administration rejected the exemption for overseas profits, but Geithner told the Republicans, they said, that he could get most of the way there.

And when Boehner brought up economic growth, arguing that his caucus would not accept tax increases under any other terms, the Republicans saw Geithner as receptive, Jackson said. “It was literally one of the last things discussed when they came in on that Sunday. And Geithner said, ‘Yes, we accept that,’ ” Jackson recalled. “We viewed it as a breakthrough.”

On this point, the two sides are in dispute. Geithner and other administration officials say it never happened. They strenuously deny agreeing to count revenue from economic growth, a process known as “dynamic scoring.”

Treasury spokeswoman Jenni LeCompte said the Republicans “were kidding themselves” if they thought the White House would concede that point. “That’s always been a total non-starter for Secretary Geithner and this administration and always will be,” she said.

So selling out Medicare and Social Security, lowering taxes on the wealthy and cutting the hell out of everything else was just fine, but dynamic scoring was the hang up? Well, I guess we at least know what the limits are now. One thing is clear from this article: the administration simply had no respect or concern for the Democratic base’s reaction to what they were doing. They had convinced themselves that raising taxes in some fashion — no matter how abstract — would be enough to assuage them.

The Gang of Six came along at a bad moment in the negotiations and one-upped the Grand Bargainers on the revenue side, which Obama foolishly embraced publicly, greatly annoying the Republicans. After all, they had already gotten him to agree to vague “tax reform” that they knew would amount to nothing. (The right hand not knowing what the left hand was doing doesn’t even begin to describe it…) In the only moment of concern for Democratic support, the administration worried that their people would defect unless they upped the ante on the the revenue side as well so they came back with an addition 400 billion in bullshit fantasy — and that was enough to make the Republicans bolt.

This whole thing was ridiculous on both sides. The Republicans fecklessly rejected the best opportunity to destroy the American welfare state they would ever be offered and do it at the hands of a Democratic president. It was only the terrible negotiating by the Democratic administration, weak-willed Democratic leaders (who “gulped” but agreed because austerity is “the right thing for the country”) and a bunch of lunatic Teabaggers that saved us.

I’ve read a lot of scary things this past week, but that’s the scariest article of all. If it hadn’t been for the happy accident of total ineptitude, we would be on the path to austerity right now and our safety net would have huge, probably unmendable, hole right in the middle.

And they’re still willing:

“There was an agreement with the White House for $800 billion in revenue,” Boehner told reporters. “It was the president who walked away from this agreement.”

Two day later, July 24, one week after the Sunday morning meeting that sparked such optimism, the president found himself trying to turn back the clock.

Working late into the evening, Obama asked someone to get Boehner on the phone. His message: I’ll take your last offer.

“Mr. President,” Boehner answered, “we don’t have time to reopen these negotiations.”

White House officials said this week that the offer is still on the table.

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